The formula used for pricing futures contracts has a basic identity element–the rate of interest. When it changes direction there is a measurable force, just like when a jet pilot changes direction there is a g-force. The pilot feels the change of direction, which is to measurably know it by “directing” the change.
Econometrics is the same way. There is a physical, measurable affect that goes with the quantifiable effects of monetary policy.
Yesterday, the Fed said it is puzzled by the slowing labor-market trend. It appears that GDP and employment numbers are moving in opposite directions. What is moving it (what is directing it) is an attributive value, and everyone has an interpretation depending on how they feel about it.
Now, understand, econometrics does not intend to measure the political risk because (like I’ve been telling you) political and economic risk is the same thing. Measuring the direction and velocity (or rate) of directed change–money flows, for example–effectively measures the political risk.
Like Sanders says, new income is flowing to the top 1%, but the Fed considers this to be political rhetoric and Yellen says the Fed’s Open Market Committee does not account for political measures of the risk.
(Puzzling, isn’t it!)
The rate on the 10yr T-bill hit a new low, today. The price to be paid in the futures is at an all-time high. So, what’s the political risk, here?
Do you feel the change of direction?
A jet pilot can feel the change of direction but not know what direction it actually is. If you are going down when you expect to go up, without using the instruments, knowing the difference is catastrophic.
Consolidation of political risk and then ignoring its equivalent, symmetrical confirmation using instruments assumed to measure it is some really bad pilot error–attribution error, politically motivated.
Directing the probable risk of failure into a TBTF proportion (ignoring the propriety of natural diversity in priority) seems like the right direction, but according to the indicators, it’s really not!
(Feel the Bern?)